SDX Energy has announced its audited final results for the year ended 31 December 2023.
The Annual Report & Accounts of the Group for the year ended 31 December 2023, containing full financial statements that comply with IFRS, is now available on the Company's website and has been sent to shareholders.
Chairman's Review
2023 marked a period of transformation for SDX. We welcomed new cornerstone investors, forged innovative gas pre-payment agreements, and reinforced our board and senior management team.
Our strategic focus and the evolution of SDX away from a pure oil and gas business into an integrated, hybrid energy provider in Morocco gained momentum throughout the year. We laid the groundwork to deliver on this strategy well into 2024 and beyond.
Sale of Egyptian Assets
In March 2023, the Company announced the reconstitution of the South Disouq disposal transaction where Sea Dragon Energy (Nile) B.V. ("Nile B.V.") assigned a direct 18.15% interest in the South Disouq concession to EFGL by way of a Deed of Assignment. EFGL simultaneously returned its 33% stake in Nile B.V. to SDX for a nominal fee. There was no change to the economic substance of the original transaction.
The divestment of the Egyptian assets has been a focal point and has occupied much of the board's time, particularly during the last quarter of 2023 and into early 2024. The West Gharib asset sale terms were agreed in January 2024 and the binding sale and purchase agreement was executed in April 2024. Following completion adjustments, the total sales proceeds received was $7.2 million. The first instalment of $3.5 million was received in April 2024 and part of it was used to fully repay the outstanding secured EBRD reserves-based lending facility, amounting to $2.7 million.
The remaining $3.7 million was received, following the deposit of EGP 100 million (c. $2.1 million) into an escrow account to be used to settle any potential tax liabilities. The Company continues to negotiate the sale of its remaining Egyptian asset, South Disouq.
Morocco
With increasing energy demand from its offtakers, the Company directed its efforts towards expanding its base of production assets. In May 2023, the Company renegotiated its gas sales agreement with one of its key customers, which allowed it to move forward with a summer drilling campaign. In September 2023, the KSR-21 well was drilled and, earlier this year, was tied in and ready to supply offtakers. After receiving the necessary government approvals in April 2024, KSR-21 was brought into production to supply existing offtakers in the Atlantic Free Zone, near Kenitra. In April 2024, we drilled the BMK-2 well, encountering a 9-metre interval with strong gas shows up to c.100 times background readings. The well was drilled to its total depth of 1,412 metres, with a plug set to allow the well to be sidetracked to the target formation, once the required equipment has been mobilised.
Our partnership with CITIC Dicastal continued to strengthen through 2023 and early 2024 and 3-month gas prepayments were concluded for the three quarters, Q4-2023, Q1-2024 and Q2-2024, for approximately $2.0 million per quarter. We continue to work with CITIC Dicastal (a subsidiary of CITIC Group - a Chinese holding company with a corporate portfolio approaching $1 trillion) on a long-term prepayment agreement for future Moroccan gas deliveries as well as other longer-term projects aimed at increasing available energy resources to feed growing industrial demand.
Corporate and Funding
During 2023, we appointed William McAvock as CFO and member of the board and Daniel Gould as Managing Director and subsequently CEO with a board seat. Following these appointments, I reverted back from my role as Interim Executive Chairman to Non-Executive Chairman effective 1 January 2024.
In addition to the two gas prepayment agreements, the Company worked tirelessly through the year to reduce costs and fund itself efficiently. This included successful balance sheet optimisation replacing a cash-backed bank guarantee with a parent company guarantee and releasing $1 million of restricted cash.
As announced in July 2023, the Company entered into a syndicated unsecured convertible loan agreement with Aleph Finance Ltd for up to $3.25 million. Pursuant to this agreement, the company drew down $2.50 million during 2023. The period to draw the remainder expired, but the original agreement was amended in April 2024 to extend the draw-down period. This granted the Company access to further cash of $0.75 million, which was drawn down in April 2024 to pay service providers in relation to Moroccan drilling activities and general corporate purposes.
Looking ahead
As outlined in our strategy update in November 2023, SDX is committed to continuing its upstream activity while embracing new opportunities for growth. Our dedication to delivering a diverse energy portfolio aligns with our vision of serving Morocco and beyond with reliable and sustainable energy solutions.
Thank you to all our stakeholders for their support in 2023 and look forward on delivering on our milestones in 2024.
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Source: SDX Energy
